Tech

TeliaSonera says it's first to deploy commercial 4G services

Ericsson, Huawei, others battling it out for broader contract; no handset 'til 2011

By

AudeLagorce

LONDON (MarketWatch) -- TeliaSonera on Monday became the first telecom operator to launch fourth-generation mobile services using LTE technology, but industry analysts downplayed the milestone, cautioning it will mean little for consumers beyond faster speeds.

TeliaSonera (TLSN) said the 4G network will be up to ten times faster than its current 3G one and allow customers to enjoy new services on the go such as high-definition TV, mobile conferencing and extensive gaming.

It hopes to derive significant revenue from such applications as consumers take up new data cards, and as handsets supporting the technology are eventually rolled out.

But revolutionary 4G services are a long way off, industry analysts warned.

"It's mobile evolution not revolution. Clearly the speeds are higher and some fixed behaviors can be extended to mobile," said Katja Ruud, analyst at research firm Gartner. But she stressed she has yet to hear of something consumers could do on 4G that they can't do now on a fixed-line connection.

At U.K.-based telecoms consultancy Ovum, Julien Grivolas was similarly cautious, saying consumers should not expect a "killer application" to accompany the roll out of 4G networks, just a "killer user experience."

TeliaSonera is the first operator to risk a commercial launch of a 4G network based on Long Term Evolution (LTE) technology, ahead of Verizon Wireless, a joint venture of Verizon Corp
VZ, +0.70%
and Vodafone Group
VOD, +0.68%
and Japan's NTT DoCoMo
DCM, -0.78%

In the U.S. Sprint Nextel
S, -2.97%
runs a 4G network using a rival technology called WiMax in a few cities.

The widespread commercial adoption of the faster networks has been delayed by the economic crisis, with many operators choosing to curb spending on network upgrades to preserve cash.

The LTE announcement is an important operational and marketing victory for TeliaSonera. But as consumers saw with the rollout of 3G networks --which ended up being far more gradual and tumultuous than anticipated-- being first with a commercial launch is no guarantee of future success.

"Being first is not the same as a good business case," cautioned Gartner's Ruud.

TeliaSonera shares rose 0.9% in Stockholm.

Two cities and an almost free service at first

At first, the 4G services will only be available in Stockholm, Sweden and Oslo, Norway, but TeliaSonera plans to expand to 25 Swedish cities and three more Norwegian ones by the end of 2010, at a cost of roughly 500 million Swedish kronor ($70 million).

The two have competed ruthlessly to meet their respective deadlines in the past few months and they now hope to win the more lucrative deal for a broader rollout.

A glitch-free launch could be the ticket to that as more players are bidding for the next slice of the contract, to be announced in January, TeliaSonera said on Monday.

"There is a ferocious marketing war going on between Huawei and Ericsson with the TeliaSonera deployment and it encapsulates their broader rivalry," said Ovum's Grivolas.

Just one modem for now

But base stations aren't everything.

In order to access the 4G network, TeliaSonera customers will need to buy a special modem manufactured by Samsung
SSNGY, +0.00%

Which is where it gets complicated.

Because the Samsung modem is not compatible with 3G networks, users will need to own a 3G modem as well for when they leave the restricted 4G coverage zone.

A combined 3G-4G modem will be available in the second quarter. Analysts said TeliaSonera may eventually offer modems from other manufacturers.

Meanwhile, the restrictions mean the operator can't expect to charge subscribers much for the service.

Until July 1, consumers keen to try out the technology will receive the modems for free and pay a subscription price of just 4 kronor a month. The price will then will increased to 500 kronor a month.

"That's quite a wide gap. I'm not sure that once people are used to paying this little for the technology they will be happy to pay so much more," said Gartner's Ruud.

Others said the commercial launch sounds more like a friendly trial.

"There's a big difference between a headline-grabbing pseudo-trial and a true commercial development that tries to attract significant scale with a service price close to what's being paid for 3G today in the mass market," said Michael Kovacocy, analyst at Daiwa Securities.

The way TeliaSonera looks at it, the first subscribers will really be testing the service.

"We know that everything won't work perfectly from scratch. Current modems have their limitations," said Kenneth Karlberg, the head of mobile services at TeliaSonera in a press conference.

For now, the 4G network is only for data services and there is no handset available, but Karlberg predicted the first 4G mobile phones might come out in 2011.

With 3G, there was a gap of several years between when the network technology became available and when the handsets actually became broadly available.

Other operators to launch LTE next year

Beyond TeliaSonera, the other operators with the most LTE experience are Verizon Wireless, which is already running some trials with Alcatel-Lucent
ALU, +0.00%
(ALU) and Ericsson, and DoCoMo.

Verizon is expected to roll out the technology commercially next year.

Rival operator U.S. AT&T
T, -0.07%
meanwhile, will launch its commercial 4G network in 2011. It had previously said it would debut trials in 2010.

"We remain cautious on the timing of the massive commercial 4G rollouts," said Grivolas. A handful could happen in 2010 and more in 2011. But he reminded investors it took years for 3G technology to be broadly available.

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